Aclass of current and former residential real estate appraisers was erroneously classified as exempt from overtime pay under federal and state wage and hour laws, a federal judge in California ruled May 6 (Boyd v. Bank of Am. Corp., C.D. Cal., No. 8:13-cv-00561, 5/6/15).

According to the appraisers' second amended complaint, they received compensation based on the number of appraisals they produced while following Bank of America Corp. subsidiary LandSafe Appraisal Services Inc.'s pre-established guidelines and procedures. Judge David O. Carter of the U.S. District Court for the Central District of California granted partial summary judgment to the appraisers, finding that they didn't fall under the administrative or professional exemptions of the Fair Labor Standards Act or the California Labor Code or meet the federal highly compensated employee exemption.

A second group of about 350 ''review appraisers'' in the same lawsuit received final approval Nov. 18, 2014, of a $5.8 million agreement settling similar misclassification claims with the company (225 DLR A-12, 11/21/14).

''As the first order deciding whether appraisers are entitled to overtime, the judgment has implications throughout the real estate appraisal industry,'' plaintiffs' counsel Bryan J. Schwartz in Oakland, Calif., saidin a May 7 statement. ''If you haven't started paying overtime to your real estate appraisers, it is time to start.''

A representative for the Bank of America companies told Bloomberg BNA in a May 12 e-mail, ''It is our ongoing belief that the staff appraisers, who are responsible for the analysis of each property, have assignments that clearly are professional and individual in nature, and as such, the classification of these positions as exempt is appropriate.''

Appraisers Engaged in Production Work. According tothe court, the nature of the appraisers' work was mostly undisputed, but the parties disagreed about ''the relative skill and judgment required to be an Appraiser.''

The appraisers argued that they didn't fall under the administrative exemption because they didn't perform work ''directly related to the management or general business operations of the employer or the employer's customers.''

The appraisers claimed they engaged in ''production work'' by generating appraisals. They argued that their work didn't impact the company's policy decisions or the direction of the business. Furthermore, because appraisers are not in contact with loan officers or borrowers, they don't ''represent'' the company to the public, they argued.

The court agreed with the appraisers. ''While Appraisers' duties involve analytical thinking to generate a valuation and complete a report,'' the court said, ''in the end, Appraisers present a piece of [Landsafe's] primary product: a report detailing an opinion as to the market value of a piece of real estate and the written support for that opinion.''

The court concluded that appraisers are more like production workers than administrative workers and thus do not fall under either the federal or state administrative exemption.

The court found that the appraisers were also entitled to summary judgment as to the administrative exemption because their duties didn't include ''the exercise of discretion and independent judgment with respect tomatters of significance.''

No 'Specialized Intellectual Instruction.' Additionally, the court held that the appraisers didn't fall under the exemption for learned professionals. To qualify for the professional exemption under the FLSA, the employees must primarily be engaged in work that requires ''advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction,'' the court said. And ''California's standard for the professional exemption is to be construed in accordance with the federal regulations in effect at the time.''

Arguing that the appraisers are exempt professionals, the company pointed to the 200 hours of training that appraisers must complete to become certified. But ''this is more comparable to on the job training than specialized, intellectual instruction,'' the court said.

''We believe there are several points that could be considered on appeal and will consider that course of action at an appropriate time, which will likely come after trial on the issues that were not dismissed,'' the Bank of America representative said. ''In the meantime, we continue to work with plaintiffs' counsel to determine if there is a settlement opportunity.''

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